Rejection of defective books justified estimated profit rate and separate treatment of FDR interest and JCB rental income.

Where books of account were rejected for defective records, cash-based expenses, self-made unverifiable vouchers, and absence of stock and quantitative tally, estimation of business income at an 8% net profit rate was upheld as reasonable. Interest from FDRs and rental receipts from JCB machines were separately treated as income outside the business profit estimate, and that classification was sustained because no material dislodged it. On these concurrent factual findings, no substantial question of law arose, so the additions made on estimation basis were maintained.

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Issues: (i) Whether the estimated net profit rate of 8% applied to the assessee's business income was justified after rejection of the books of account; (ii) whether the treatment of interest income from FDRs and rental income from JCB machines as income other than business income was justified; (iii) whether any substantial question of law arose from the findings recorded by the lower authorities.

Issue (i): Whether the estimated net profit rate of 8% applied to the assessee's business income was justified after rejection of the books of account.

Analysis: The books of account were found defective because major expenses were cash-based, the vouchers were self-made and unverifiable, and the assessee had not maintained a stock register or quantitative tally. On these findings, the authorities below rejected the books and estimated income by applying a net profit rate of 8%, which was held to be reasonable.

Conclusion: The estimation of income at 8% net profit rate was upheld.

Issue (ii): Whether the treatment of interest income from FDRs and rental income from JCB machines as income other than business income was justified.

Analysis: The receipts from FDR interest and JCB lease rent were separately noticed and excluded from the business profit estimate. No material was shown to disturb that treatment.

Conclusion: The separate treatment of those receipts was upheld.

Issue (iii): Whether any substantial question of law arose from the findings recorded by the lower authorities.

Analysis: The dispute turned on concurrent findings of fact regarding rejection of books, unverifiable expenditure, absence of stock records, and reasonableness of the estimated profit rate. No legal error warranting interference was shown.

Conclusion: No substantial question of law arose.

Final Conclusion: The appeal failed on the concurrent factual findings and the additions made on estimation basis were sustained.

Ratio Decidendi: Where books of account are rejected on cogent factual defects, income may be estimated on a reasonable basis, and such concurrent factual findings do not ordinarily give rise to a substantial question of law.

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